Finance Monthly - November 2021 Edition

31 Finance Monthly. Bus i ne s s & Economy unlimited government spending – but the markets are open for smart, credible governments to sell more debt and create more money. The key word is credibility – and avoiding policy mistakes. The UK spending itself out of its current hole should be entirely feasible. Rather than hiking taxes and cutting the modest £20 a week targeted helicopter money of universal credit to the poorest 10% of the economy, the government could keep the economic wheels spinning through the current supply chain/recession/stagflation threat. Sunak’s plan to impose austerity and tax hikes as we enter a potential stagflationary environment could prove a recipe for a confidence breakdown. It looks a classic policy mistake. What’s the alternative? Well, that’s difficult. Politically it’s impossible to tackle the ever-hungry spending behemoth the National Health Service has become. But it’s critical it’s done – refocusing it to deal better with the modern age and the diseases of the old and infirm. It’s now in long-term crisis as it scrabbles to refocus post- pandemic – costing billions. Staff are underpaid and demotivated – costing more billions. Yet the NHS was recently advertising 200 plus senior managerial roles paying more than the prime minister. Modern tech can help – fitness and diagnosis can digitise, but the government has a peculiar ineptitude with new systems. Unless the government addresses the growing burden of public sector pensions – the entire UK tax take will soon be directed to paying the retirement costs of state employees. But to even suggest it – would again be political suicide. There are a host of other policy initiatives the government could consider, but sadly they are the kind of concepts Boris and his fellow Oxbridge PPE rejects don’t have the imagination or political bravery to explore. I reckon Sunak probably does – but he’s got to bide his time. As a primer Boris needs to understand good and bad government spending – and integrate them into his political calculus. Creating economic growth through a fiscal boost to companies to create jobs, growth, and build infrastructure is good. Solving skills shortages by paying doctors, nurses, engineers and HGV drivers to train, rather than charging them, would work. Spending money on fast, small Nuclear energy solutions and tidal power – tick. Helicopter money has been shown to work in a crisis. Markets accept the QE money creation trick – it works. Ask difficult questions: Why are we charging students for their education? Why aren’t we paying them to upskill? Why aren’t we spending more on the armed forces in a period of rising tension to generate greater security, but also multiplier effects across the economy? There are a million more to be posed… There are positive signals beginning to emerge – but aside from lots of words, there seems to be very little strategic thinking going on in the party of government to actually deliver these hi-skill jobs and raised productivity. Words are cheap. Action is difficult. Rishi Sunak